Investment general discussion thread

In My Humble Opinion
1603

Semiliquid funds aren’t private funds. The requirements accredited investor status to invest directly in private funds haven’t been loosened. Semiliquid funds are a registered product that provide better disclosure and some statutory and regulatory protections for their investors that private funds don’t offer.

My impression is that semiliquid funds are mostly focused on private debt markets, which are generally easier to value than private equity holdings.

None of this means that semiliquid funds are necessarily a good idea for retail investors. They are, however seeking to solve a real market problem. Institutional investors and high net worth individuals have become so wealthy, no one needs to offer publicity available securities to everyone (meaning middle class investors) to get the funding that they need. So there are fewer public companies for everyday investors and pension funds and more closely held unicorns making a smaller number of people wealthier. Semiliquid funds are aiming to plug a hole for middle class investment opportunities with…something.

1604

I am very aware of my ignorance here but according to Morningstar as cited …

Semiliquid funds are commonly used to provide access to alternative investments, such as private equity …

I also understand expanded access is awaiting Senate passage?

Meanwhile ETFs like below are apparently the end run for the PE funds to get to the general public suckers … I mean investors!

1605

Is there a lot of value to an HSA if I’m not contributing to it for the entire year? I’d been considering the idea of putting money in from my paycheck only after capping the 401k for the year (when in the year that happens can vary), if that was possible. Is it worth the hassle of setting it up? Or maybe if I just put in a very small amount throughout the year, so it wouldn’t make a material difference in life month to month while contributing to the 401k?

1606

We’ve discussed HSAs a time or three. As a way to pay for medical expenses, they’re an almost joke.

As a form of tax-advantaged savings, you can think of them as an auxiliary mini-401k. If you’re already deferring the legal max into your 401k ($24.5K plus various catch-ups if you’re old enough), then putting more money into the HSA is a fine idea. As a retirement savings vehicle you intend to invest for the long term. Not as a piggy bank for doctor or pharmacy visits.

The HSA contribution limit is $4400 for a single person and $8750 for a 2+ person family, plus catchups if you’re old enough. So assuming a single person too young for catchups (< age 50), you can top up your 401k’s 24.5K with an extra 4400. An extra ~17%.

When you’re using an HSA as a retirement savings vehicle, then the annual timing you asked about becomes almost immaterial. What matters is to absolutely positively fill it with the full $4400 before yearend so you don’t waste the right to this year’s contribution. Same as an IRA: contributions not made in any year are lost forever.

As a general matter, every savings / investment vehicle performs better the sooner you can fund it. If you could fill your 401K, HSA, and IRA to the legal max on Jan 1, that’d be better than waiting until Dec 31 to do the same thing.

My own take, when I was eligible for an HSA, was to fill my 401K ASAP, then direct the same high saving rate into the HSA until it was full.


Related note:

Some HSAs make it easy to invest most or all of your account value in real investments like stocks and bonds and mutual funds. Other HSAs are pretty much bank savings accounts paying effectively zero interest. It all depends on what provider your employer signed up with and which plan they’re using. Whatever they chose, that’s what you’re stuck with.

An HSA that is a mere savings account with no (or nearly no) investment potential is all but useless as a retirement savings vehicle / auxiliary 401k.

If you’re stuck with one of those, you’d need to work some actual numbers to decide whether the hassle of fiddling with the HSA as just a medical expense piggy bank is worth it. Yes, a dollar saved is a dollar earned. But at some point you’re jumping through hoops for $100/year in savings. Why?

1607

We have a very high deductible employment supplied medical plan. The firm contributes to my HSA something like $7,500 per year. I can add $1,000 per year pre tax. We usually spend the same amount annually that is put in. But it’s pretty easy.

1608

I too have had an HDHP + HSA. I’m retired now, so it’s HDHP with no HSA. I’m a real believer in HDHP.

My take on HSAs was the contribution limit for a single was too low to move the needle. Since the family limit is ~double the single limit, it was the same for a couple; a little too little to matter. But becasue the limit doesn’t grow as your family does, the value of the HSA becomes increasingly irrelevant as the size of your brood grows. But HDHP + HSA was originally sold to the public as being explicitly for big families on a budget.

An HSA that is fully funded by your employer to the basic limit, leaving only the catch-up for you to fund is an awesome perk. I was never fortunate enough to be in that spot. But it sure goes a long ways to increasing the attractiveness of an HSA.

As to ease …

Back when I had HSAs, it was three different runs of years with three separate employers with three different HSA suppliers. One was a breeze to use. The other two were evidently designed to discourage use; it was nearly impossible to get them to approve an expense reimbursement without a fight. And without a fax machine.

That’s not the fault of the HSA as such. But it shows that, as always, our regulatory regime does not prevent sleazy operators from operating sleazily. Employers choosing an HSA vendor based on low price (IOW most of them) will naturally gravitate towards the sleazier end of the market as the lowest prices come from the lowest costs.

1609

A retirement question for those who are at various points of retirement -

The standard guidance is that expenses go down in retirement. Some allowance for staying near same during an initial “go-go” phase, but expecting a “go-slow” by maybe mid 70s and then “no-go” and possibly increased healthcare costs.

I’m skeptical.

How has that expense out prediction pattern worked for you who are in retirement?

1610

I’ve only been retired 2-1/2 years. So not enough time to see decadal change or signs of waning healthspan. Yet.

So far, if anything, my spending is still climbing as I’m still in the go-go years and the “I haven’t finished my bucket list yet.” By deliberate design, I’ve kept my nut a rather small fraction of my spending, so I can pull my horns in quickly were circumstances to suddenly become dire.

Here’s some reading that I’ve used to inform my own beliefs about the shape of the typical retirement spending curve as applied to the reasonably well off, as opposed to the entirety of the US population. Each of these articles has a host of cites for further reading.

1611

Mine are pretty much identical. Some of that lowered retirement expenses notion seems to be predicated on “best practice” assumptions like that you’ll have your mortgage paid off when you retire. But personally I’ll be paying a mortgage for the rest of my life. All the little appreciating expenses like property taxes (very minor 2% per annum max in CA), HOA fees and utility bills don’t change. Food - same. I may be cooking a little more, but I like eating out and I have a tendency to not always cook cheap. Random purchases, pretty similar. Driving, probably a wash - I drive a bit less often, but more frequently to farther away places (my job was only about a ten-fifteen minute drive away from home).

I’m not really seeing where my retirement lifestyle savings would come from. Thankfully when I was working I had an excess of income, while in retirement I easily have a sufficiency of income. Probably even still a small excess. I’ve got room to tighten my belt more, but I’ve felt no serious pressure to do so yet. That could change, we’ll see - it is still early days (less than a year).

1612

I had lunch with a friend the other day, and we chatted about our favourite stock: RocketLab. We both had got in at the start, but while I only put in a couple of k’s, he had gone ‘all in’ (his words) and committed tens of thousands. Of course, we’re now comparing plans for exiting the stock and what to do with the proceeds. I’m thinking about a new car within the next six months. He’s already got enough to pay cash for a new house, but is confident enough about RKLB stock rising even further to leave it to probably double today’s price.

The reason I mention this in context of ‘genius’ is that he had persuaded his kids to try their hand at investing by putting some of their savings into RocketLab too. Of course, those two kids now have a ready-made college fund and now believe that their experience is normal for making money on the stock market.

He readily admits that he’s never going to repeat his success, but now worries that he’s somewhat misled his children about the realities of growing your money.

‘Past performance is no guarantee’…

1613

I was looking at Palantir the other day. A friend was touting the shit outa them 2 summers ago.

Up 2000% percent since then, then backed off to a mere up 1500%. If I’d have pulled the trigger I’d probably have bought in for $200K. Oops.

1614

Just curious; over how long did you and he hold this stock? And of course your friend might learn the hard way that it’s not going to double from where it is now. Has he considered cashing out, even if only a portion of what he’s gained?

1615

I was invested in Palantir during a good-sized run up the market, and the. my conscious got the better of me. It may be the most evil company ever created. I’m usually not worried a ton about socially-conscious funds, but directly investing in the actual evil itself was a little much for me personally.

1616

That is a lot of why I didn’t buy. I’m a pretty ruthless personality. They were beyond my pale.

1617

The graphs in the first cite breaking down into subgroups are interesting.

But where do the decreases happen?

We are like @Tamerlane - moved into this house five years ago and have 25 years on the mortgage. Real estate taxes will continue to go up. Intention is to live here until we can’t, if that ever happens. That cost stays. I guess mortgage doesn’t go up with inflation so goes down in real terms!

More home cooking? Probably not.

Less commute costs sure, but we’d maintain two cars. Clothing costs? I spend little now and my wife will still like to look nice working or retired.

What drops so significantly? I’m looking specifically at the high net worth “matched spending” group … is it that they’ve paid off their mortgages and are done paying for kids’ educations? What are they no longer spending on that they stay under pre retirement expenses even in go go times?

1618

I’ve been retired for 10 years, and I’m not sure we spend a lot less. Big spending items are things like new cars. We paid off the mortgage (not very big) a while ago when the tax advantage went away. We put in air conditioning, and have gotten new carpeting, new flooring, and a paint job. But none of that (except for the cars) was that expensive.
We do home cooking almost all the time because we prefer it. We’ve been on a bunch of cruises. We did road trips. We’ll be visiting our daughter when they move to Belgium, and I intend to splurge for business class.
We mostly don’t spend a lot because we are too busy with our inexpensive hobbies and projects, some of which even make money.
This is not from concern about running out of money. Given my maxed out Social Security and significant investment income, we make more than we spend, and, given the market, we have lots more money than we did 10 years ago.
We paid for our kids education when they were in college, so no debts from that. Thanks to Prop 13 our real estate taxes go up incrementally and are absurdly low given the value of our house. I do save a good bit on gas money since we hardly drive anywhere.
We did an analysis of our spending before I retired, and found that 20-30% of my salary was going into savings. We’re not doing that anymore, but the real spending hasn’t changed much.

1619

We both got in when it listed (August 2021) and added to our holdings during the next two years as the stock price stayed below initial listing.

Yeah, my friend is talking about selling approx. 40% of his stock at a price point not too much higher than it is now. I happen to agree that there’s still a lot of upside to the stock, as it’s heavy-lift rocket (Neutron) isn’t even operational yet. If that proves successful just as plenty of huge contracts become available then it’ll do fantastic. On the other hand, if the first launch explodes on the launchpad, there’ll be a dip…

1620

I realized later that a significant part of your question was implicit, not explicit (much). Namely how does spending change around the cusp of retirement. Say last working year versus first retired year. And that I did not address at all. Here goes …

My own experience was that what I spent on changed, but the amount changed little. Now I had the kind of job that resulted in a lot of cash outlays every month; 15-20 days per month eating 3 meals per day in restaurants and hotels ain’t cheap. And while we did have an expense reimbursement, it was a flat rate that wasn’t nearly adequate to reality. But I ate out at home a lot too, so the change was more in which restaurant I ate in than whether it was in a restaurant or at home.

In all, I find the idea that anyone’s huge work-related expenses drop off to be replaced by …nothing … upon retirement is mostly reporters repeating conventional wisdom invented by other reporters. With a strong whiff of 1960s lifestyle. No more three martini lunches M-F or five train rides into the City every week and your housewife will be making dinner at home as always. That’s nonsense to its core.

To the degree anyone does pay off their mortgage late in their worklife, and to the degree their kids finally graduate from feeding at the parental trough also late in those working years, those expenses can and do disappear. Leading to a sudden windfall of income no longer consumed by expenses. Which cushions the blow when the income stops too.

That wasn’t me and does not sound like it’ll be you or @Tamerlane either.

1621

Yet your links cite data, and show charts. I’ve not followed to the articles the data come from but I’ve no reason to disbelieve … other than the fact that I just don’t understand why it would be so. Especially for those of us who don’t have huge work-related expenses!

1622

Not sure if this is the right thread, but it’s vaguely investment related, I guess:

I know full well that the advice always given on the 401k is to not touch it, because withdrawing $3,000 today can cost you $20,000 down the road thirty years from now - not just because of lost growth, but also the early-withdrawal penalty (I’m age 38, well below 59.5) and taxes. Nevertheless, I’m in a pickle. I had a recent car accident, medical bills, a variety of other expenses piling up - not too big, but too big for my income to cover. I have about $120,000 in a 401k from a former employer, I’d lost my job three years ago. From what I understand, I can roll it over into an IRA and then, since it’s disbursed to me (due to my no longer being employed,) I can then make a partial withdrawal. Right now, before rolling over, I have only the option of total withdrawal from 401k (which I don’t want,) according to the Fidelity website - or leaving as is, or rolling over into IRA. Any thoughts?

The advice often given online is, “Don’t withdraw from the IRA, just pick up a 2nd job to supplement your main income to pay off the bills” but I can’t do that, my main job has me too exhausted already. I can’t think of any other way to come up with the income to cover the needs. I’d only need to withdraw about $7,000. I don’t have anything I can sell off to raise money either.

I am, in the meantime, still contributing to a new 403b with my new employer, so I’m still putting away something for retirement and growing it.